Competition, Diversity and Economic Performance

Competition, Diversity and Economic Performance

Processes, Complexities and Ecological Similarities

Clement A. Tisdell

This thought-provoking book explores the influences of market competition and diverse behaviours of economic agents on economic performance, particularly dynamic economic performance.

Chapter 14: Business partnerships, cooperation and the enhancement of economic performance

Clement A. Tisdell

Subjects: economics and finance, evolutionary economics, industrial economics, environment, ecological economics

Extract

The previous chapter considered reasons why firms exist and discussed the extent to which market- like mechanisms (transfer prices) might profitably be used to manage a vertically integrated firm. The analysis considered the economic performance of such a firm when each of its divisions is a profit centre with the salaries of the managers of each division positively linked to the imputed profit of their division. It was observed that such a managerial arrangement is subject to ‘market’ failures. Causes can include the existence of market transaction costs (the straddle case), externalities (or synergies) between divisions and inadequate knowledge about the relationships needed to determine optimal transfer prices. As observed by Richardson (1998a, pp. 52–3), market failure is also liable to occur within the firm if one of its division or a profit centre experiences decreasing per- unit costs of production. He (Richardson, 1998a, p. 52) observes that ‘paradoxically the creation of profit centres within a business may at once be necessary for and incompatible with the maximisation of profit for a business as a whole.’

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information